Las Vegas Mortgage Rates Continue to Improve

For the fourth day in a row, Las Vegas mortgage rates continue to improve.  They are still close to their highest level in a few years but they are still low from a historical perspective and they are definitely lower than they have been on a few other recent occasions, including the end of last week.  Las Vegas mortgage rates are also low relative to what they will probably be over the next year as the tapering of the Quantitative Easing program #3 will begin soon and as that program winds down, there will be less support for bond prices (to the tune of about $45 billion per month when the program ends completely) which means higher rates as bond prices fall.

The message to prospective buyers should be two-fold:  1)  Buy now.  Home prices and rates aren't getting any lower.  Experts forecast prices to increase 10-12% over the next year and for rates to be about 1% higher over that same time period.  This means that a buyer won't be able to afford as much home and that the cost of a home he can afford would have been much cheaper in overall price and monthly payment now than a year from now.  2) If a buyer isn't going to buy now for some reason, that buyer should at least consider taking advantage of our Lock and Look program.  This program allows a buyer to lock in current rates for up to a year while they shop around for a home.  If by chance rates happen to be better than what they locked at, we can float down to current rates but if they go up as I expect they will, the buyer is protected on the rate side; too bad the only way they can lock in today's price is to buy TODAY.

Data will continue to be the driving force for Las Vegas mortgage rates and when the Fed finally decides to begin the tapering process.  This morning we had two data points that should have had a negative impact on rates:  Consumer confidence came in higher than expected and last month's number was adjusted higher as well.  Additionally the Richmond Manufacturing index did an about face from -11 last month to +14 this month.  Both of these should have sent the benchmark bond down in price which would mean higher interest rates.  However, the unrest in Syria and the debt ceiling issues of the US are providing good support for bond prices now.  Remember that bad news for the world means good news for interest rates as bonds are thought of as safe haven investments which means as investors move from stocks and other "riskier" investments to the safety of bonds, bond prices increase and the rate goes down.

Mortgage Bond Chart:

Bond prices have come off their highs because of the economic data from this morning but they are still currently up 18 basis points for the day as of this very minute.  My advice is to float with caution (and use me to handle your client's mortgage).  Watch rates and economic news closely because there are a number of things that could turn the market on a dime and you or your client could miss out on the recent gains.  Please feel free to share and comment.  Please also subscribe to my YouTube channel (www.YouTube.com/TheWunderliTeam) where I provide video updates every Monday and Friday along with bonus videos regarding new loan programs and guidelines as well as marketing strategies.  Make today great!

Mortgage Rates - What Really Drives Them, Part 2

In yesterdays post I wrote about what drives mortgage rates from the technical and fundamental side of things.  What I didn't tell you about is the third thing that drives interest rates - the lenders themselves.

All lenders sell mortgages in the secondary market; there are some lenders who offer portfolio products and those are held in the lenders portfolio, at least for a short time and sometimes for the life of the loan.  The regular loans that can be securitized like FHA, VA, conventional and jumbo all get sold off.  The lenders may or may not keep the servicing rights but they sell off the interest rate rights which frees up more capital to write more mortgages.

Big lenders have targets as to how much penetration they want to have in any given market.  If they are considerably under that target, they may offer rates that are below the market for a short time in order to "buy" more mortgages.  This entices borrowers to go with them or mortgage bankers and mortgage brokers to send more loans their way until they have the level of business they want at which point their rates will revert to market rates.

Conversely, if a lender decides that it has all of the exposure it wants in a given market, it will raise rates such that it won't be attractive for a borrower to choose that lender.  This happened at Bank of America when I worked there in 2009.  In a sales meeting our sales manager told us that the bank had all the exposure it wanted in Southern Nevada and so they were going to raise interest rates to a point such that borrowers probably wouldn't choose to do business with them but if they did, the reward for Bank of America would be good enough to offset the additional risk of another loan in the saturated market.

Herein lies one of the advantages that a mortgage banker who sells to a number of lenders has over the big banks.  When a big bank raises their rates, they don't have an alternative to offer their clients to keep the business coming in.  When one source of a mortgage bankers list of lenders raises its rates, the mortgage banker still has a number of other options to choose from.  With the lenders we sell to, it is usually the same three or four who always have the best terms.  It varies as to which one of those lenders has the best rate on any given day but having these options is a great thing for the clients.  Another added benefit is the fact that some lenders interpret guidelines a little more liberally than others but that's a topic for a whole different post.

It's important to remember that for the most part, mortgage rates are driven by technical analysis, fundamentals (economic data) and the secret sauce - the lenders themselves.  Feel free to comment and share your thoughts and ideas.  Here's a snapshot of the mortgage bond market currently: